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Producer Selling Caps Sugar Rally. Chart Looks Heavy.

Posted 10/11/2019 7:32AM CT | Joe Nikruto

This week’s comment finds the March sugar contract retracing gains posted in September. Short covering and talk of production deficit for 2019/2020 has provided support to March sugar for weeks. but the last 5 trading sessions have seen this support erode. Failing just under 13.00, at 12.93 to be exact, the March contract has fallen all the way to 12.31. A feature of the recent rally was short covering. The Fund trader was still short about 176k contracts as of October 1. This size short position was a surprise to me. The March contract had rallied above levels where we would normally see the Fund trader getting flat, or even long. We will get another view of this position with Friday’s updated COT, the March contract could be at an inflection point.  Again, we see producer selling cap a rally in sugar. If there is more producer selling to be done and the Fund trader gets pushed back into a bearish tilt, we could be headed for a test of the lows. A close below 12.22, forces the fund trader to begin establishing new short positions. The 18-day moving average comes in at 12.47. The longer sugar stays below this level the heavier it is going to look on the chart. March puts give bearish traders short exposure until February 15 of next year.

Joe Nikruto

Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it." In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems. His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen. As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."